Archive for the ‘contract issues’ Category

What is a Professional?

Monday, January 17th, 2011

On a daily basis, we are constantly told in advertising and by individuals that they are professionals and that their occupation is a profession. So, what is a Professional?

A professional is a member of a vocation founded upon specialized education and training and, therefore, that individual is an expert who is a master in a specific field.

The word professional traditionally means a person who has obtained an advanced degree and a license in a field that is state regulated. The term commonly describes highly educated, licensed, mostly salaried workers, who enjoy considerable work autonomy, a comfortable income, and are commonly engaged in creative and intellectually challenging work.

Because of the personal and confidential nature of many professional services and thus the necessity to place a great deal of trust in them, most professionals are held up to strict ethical and moral regulations.

The main criteria for a professional includes the following:

Specialized Knowledge:  A professional is in a vocation that requires the possession of theoretical and specialized knowledge in the field in which one is practicing by obtaining a college degree after a long period of education and enduring a long and arduous training period.

Codified Body of Knowledge:  A professional is in a vocation with a codified body of knowledge that is unique to that vocation and is examined by statute regarding that theoretical body of knowledge.

History of Profession:  A professional is in a vocation that has a history of that vocation that is critical to understand in order to be a member of that profession.

Licensed:  A professional possesses a state-issued license that is obtained through a rigorous examination process. The professional is typically regulated by statute, with the responsibilities of enforcement delegated to the respective regulatory bodies, whose function is to define, promote, oversee, support and regulate the affairs of its licensees.

Ethical Standards:  A professional has a higher standard of professional ethics, behavior and work activities while carrying out one’s profession (as an employee, self-employed person, business, company, or partnership/associate/colleague, etc.). The professional owes a higher duty to a client, often a privilege of confidentiality, as well as a duty not to abandon the client just because he or she may not be able to pay or remunerate the professional. Often the professional is required to put the interest of their clients ahead of their own interests.

High Quality Work:  A professional produces high quality work in, for example: design, services, presentations, consultancy, research, administrative, marketing or other work endeavors.

Independence:  A professional tends to be independent and autonomous meaning that they have a higher degree of control of their own vocation and business.

Professional Associations:  A professional has a professional associations organized by their members that are intended to enhance the status of their members and have carefully controlled entrance requirements.

Thus, by the above definition, a professional is limited to accountants, architects, attorneys, dentists, engineers, nurses, pharmacists, physicians and professors.

As Professional Architects, we strive to fulfill the above definitions of a Professional.   Please contact us at: .

Additional Insured Coverage: Unveiling Myths and Planning for Reality

Wednesday, November 3rd, 2010

Additional insured coverage: Every company involved in the construction of a building knows that such coverage is a required element for any contract. Sometimes a party is giving additional insured coverage; other times, the party is receiving the coverage.

Beyond this limited level of knowledge, most companies merely check the box to ensure that the words “insurance” and “additional insured” appear in the contract or lease, and then give no further thought to how much coverage has been conferred or whether the words in the contract are sufficient to confer any insurance rights at all.

Moreover, most companies fail to recognize that the words in the contract are crucially important in terms of setting the parameters for the additional insured coverage provided. Additional insured coverage can be a slippery slope depending on whether coverage is being given or received.

Before entering into your next agreement, consider the following myths about additional insured coverage and best practices for establishing reasonable expectations vis-Ã-vis additional insured coverage.

Myth 1: A Certificate of Insurance is Sufficient to Establish Additional Insured Status

This is a common misconception. A certificate of insurance is a pre-printed form that is usually prepared by the named insured’s insurance broker. A careful reading of the certificate reveals that, on its face, the certificate is being provided only for the purpose of demonstrating that the named insured has coverage with the insurance company identified, in the amounts identified, and during the policy period identified.

Some certificates of insurance even state (in the very fine print) that the recipient of the certificate has no rights at all under the policy. In order to obtain additional insured status, the certificate must explicitly identify the recipient’s company by name and designate it as an additional insured.
Alternatively, the company may have to review the named insured’s policy to determine whether it contains a broad form additional insured endorsement, which, in essence, establishes additional insured status for any party that has entered into an insured contract with the named insured. The broad form endorsement has become commonplace for companies engaged in construction activities.

Myth 2: Limits of Liability Identified in the Certificate Will Be Sufficient and Available to Cover Any Loss

Most contracting parties include minimum insurance limits that must be carried while the contract remains in effect. Thereafter, the party receiving the insurance assurance sometimes requires production of the certificate of insurance to demonstrate compliance with the contract provision. However, many parties overlook three critical issues that often arise.

1. First, the limits will be available to both the named insured and the additional insured. Therefore, depending on the size of the project and the ultimate ensuing loss, the limits may be eroded quickly and patently insufficient.

2. Second, the limits identified in the certificate will be available to the named insured (and any additional insureds with which the named insured may contract) for other losses that may take place during the policy period. In other words, regardless of the number of contracts that the named insured enters, regardless of the number of additional insureds which may have rights under the policy, and regardless of the number of losses that may be experienced, the insurance company has contracted to provide only one aggregate limit that will be available during the policy period to all potentially covered parties.

3. Third, in some policy forms, defense costs paid on behalf of an additional insured may erode the policy limit. Again, depending on the nature and size of the loss, this provision may have a severe negative impact on the availability of overall limits in today’s climate of scorched-earth, expensive litigation.

Myth 3: An Additional Insured Will Only Have Access to the Named Insured’s Policy for Vicarious Liability

One of the goals of any contract is to establish that each party should be responsible for its own negligence, even if a court of law may impose vicarious liability against the innocent contracting party.

For example, when a general contractor (GC) is bidding on the construction of a commercial building, the GC seeks to establish in its contract with each subcontractor that it will not be responsible for damages that are suffered as a result of the subcontractor’s work performed on the construction project.

One way for the GC to insulate itself from liability is to require the subcontractor to name the GC as an additional insured on its policies. However, as many subcontractors have learned, courts do not always limit the scope of insurance available to the GC to those scenarios where a GC is being held vicariously liable for the conduct of the subcontractor.

Rather, many courts have allowed GCs to recover under the subcontractor’s policy where the loss “arises from” the subcontractor’s work, even where the GC has, in whole or in part, caused the loss through its own negligence. Similar issues have arisen with respect to leases.

Importantly, when courts evaluate whether additional insured coverage should be limited to vicarious liability as opposed to contributory/sole negligence scenarios, the contract language establishing the insurance requirement becomes the linchpin of the analysis.

Courts routinely strive to fulfill the reasonable expectations of the contracting parties and, therefore, may broadly construe the insurance obligations unless the contract mandates a narrow scope of coverage.

The above article is reprinted with the permission of Lynda A. Bennett, Esq., Herold Law, P.A., Warren, New Jersey, email: